SNC-Lavalin has Plan B if Canadian law not changed for corporate corruption: CEO

The Canadian Press

Published: Feb 22 at 8:34 a.m.

Updated: Oct 24 at 3:36 p.m.

MONTREAL — SNC-Lavalin Group Inc. says it has a Plan B if the federal government fails to enact legislation to address corporate wrongdoing with the introduction of a deferred prosecution agreement regime.

"I think there's alternatives that we could and we do look at, but basically, we'd prefer the first option," CEO Neil Bruce said Thursday in a conference call about its 2017 results that saw profits surge in the latest quarter.

SNC-Lavalin is contending with RCMP allegations that the Montreal-based engineering and construction firm paid nearly $47.7 million to public officials in Libya between 2001 and 2011 to influence government decisions. It has also charged the company, its construction division and its SNC-Lavalin International subsidiary with one charge each of fraud and one of corruption for allegedly defrauding various Libyan organizations of about $129.8 million.

The firm has pleaded not guilty to the one fraud and one corruption charge filed by the RCMP against SNC-Lavalin and two of its subsidiaries. Convictions could result in companies losing the ability to compete for government business.

Bruce said SNC-Lavalin and the business community in Canada are pleased that the federal government conducted a consultation process last year about enacting a deferred prosecution system.

"We hope that that happens and then we would like to be able to engage with the relevant authorities," he said, noting that legislative action is not in its control.

The firm has argued that the agreements would allow companies to settle corporate corruption cases and avoid being put at a disadvantage when competing against rival firms in other G7 countries.

On the earnings front, SNC-Lavalin said Thursday that it anticipates a double-digit increase in adjusted profits in 2018 as the acquisition of British engineering firm WS Atkins plc offsets continuing market challenges in some sectors.

The growth will come from internal growth likely through part of 2019 as it focuses on integrating Atkins this year instead of pursuing new acquisitions, and paying down debt.

"We will then be looking to move more into the market again for future growth to deliver the 2020 vision" Bruce told analysts.

The company said its full-year adjusted net earnings should range between $3.60 and $3.85 per diluted share. That's 12.5 to 20 per cent higher than the $3.20 per share earned last year.

SNC-Lavalin said it expects the Atkins, mining and metallurgy, and power segments will improve while oil and gas along with infrastructure segments will be in line with 2017.

"Our selection as a preferred proponent for the Montreal light rapid transit system underscores the quality of our organic prospects and bolsters our reputation as a leader in infrastructure in Canada."

SNC-Lavalin capped a strong year by seeing its net profit surge to $52.4 million or 30 cents per diluted share for the quarter ended Dec. 31 as revenue jumped 32 per cent to $2.92 billion from the prior year.

That compared with a profit of $1.6 million or a penny per share in the final quarter of 2016.

For the full year, it earned $382 million or $2.34 per share, up from $255.5 million or $1.70 per share in 2016.

Revenues increased nearly 10 per cent to $9.3 billion.

The company said its quarterly dividend will rise by five per cent to 28.7 cents per share, payable March 22.

On an adjusted basis, SNC-Lavalin said it earned $172.7 million or 98 cents per diluted share in its most recent quarter and $522.3 million or $3.20 per share for the year.

Analyst Maxim Sytchev of National Bank Financial said the stronger-than-expected results reinforce his positive outlook for the company.

"With SNC trading at such a material discount versus U.S. peers, we are feeling better about our positive call as we are not seeing a step-down in company's profitability," he wrote in a report.